When looking to invest in property for the first time, the key elements to take into consideration are whether you are investment-ready and well informed on all possible options.
Home ownership is a major commitment that should be evaluated in terms of your life plans and financial situation both now and in the future. As a first time buyer it is crucial to be informed and ask the questions: When, where, why and how to invest in your first property. Here are some guidelines to finding the answer:
WHEN
The answer to that is: as soon as you can afford to. It is never too early to get your foot into the property ownership door and it is important to move quickly and take advantage of a recovering market. However, it is not advisable to rush your decision, but rather consider whether you can afford to make the necessary financial commitments. To make an accurate assessment of this, it is advisable to use the resources available, for example banks and bond originators will be able to give you estimated repayment figures based on bond requirements. As a rule of thumb, monthly bond repayments cannot be more than 30% of your total expenses and the majority of first-time buyers will be required to provide a deposit of up to 20% of the purchase price of their home before being approved for a bond.Remember it is not just the mortgage you will be paying as there are other costs involved in a property transaction. These costs can add up to a sizable amount when looking at factors such as transfer fees, deed office fees and levies, municipal rates, bank charges, bond initiation fees, home insurance costs as well as the monthly administration fee that is charged by the bank, moving costs and the cost of maintaining the property. When assessing affordability it is essential to include all of these into your calculation. WHERE Location is of the utmost importance and in terms of investment, can never be stressed enough - as the age old saying goes location, location, location! Being in the right area will ensure a good resale value and return on your investment. When looking into an area, consider proximity to amenities such as schools and shopping centres. Online property search portals can be used to find statistics on areas and values of property. Estate agents can provide you with a comparative market analysis, which will give you thorough knowledge of the property sales dynamics of a certain area.
WHY
Property remains a solid asset class in which to invest. Buying property is a huge step towards financial security and growth and is a great way to invest in your future. Assuming there are no drastic changes in interest rates, any 20-year bond repayment should dramatically decrease in real terms as your salary increases with inflation. This means that even though you might have to tighten your belt to ensure you have enough money for the monthly payments when you initially start, they will become much more affordable as time goes on.
HOW
Wherever possible, save! The larger your deposit, the smaller your repayments and the easier it is to buy the house of your dreams. It is also vital to have as much disposable income as possible, as this will have a bearing on whether your bond is approved or not. Paying off any existing debt as soon as possible will improve your disposable income and your credit rating. Maintaining a clean credit record will be invaluable when being assessed for bond approval. Once you have the required deposit and decided on the type of property that will suit your life stage, working with a mortgage originator will ensure that your bond application is a smooth, hassle free process. When you are ready to take the next step, it is important to partner with a reputable estate agency to help source your perfect property.